Monthly Economic ReportExecutive Summary( Apr 2020 )

(Provisional translation)

(Assessment of the current state of the Japanese economy)

The Japanese economy is getting worse rapidly in an extremely severe situation, due to the Novel Coronavirus.

  • Private consumption is decreasing rapidly, due to the influence of the infectious disease.
  • Business investment is almost flat.
  • Exports are decreasing recently, due to the influence of the infectious disease.
  • Industrial production is decreasing, due to the influence of the infectious disease.
  • Corporate profits are decreasing rapidly, due to the influence of the infectious disease. Firms' judgments on current business conditions is deteriorating rapidly, due to the influence of the infectious disease.
  • Employment situation shows some weak movements lately, due to the influence of the infectious disease.
  • Consumer prices are flat recently.

  Concerning short-term prospects, an extremely severe situation is expected to remain due to the influence of the infectious disease. Moreover, full attention should be given to the further downside risks to the domestic and foreign economy which are affected by the influence of the infectious disease. Also, attention should be given to the effects of fluctuations in the financial and capital markets

(Policy stance)

  The Government will make its utmost efforts to ensure the economy overcomes deflation and achieve economic revitalization and fiscal consolidation simultaneously, in addition to make effort toward the reconstruction and revitalization from the Great East Japan Earthquake and the restoration and reconstruction from the 2016 Kumamoto Earthquake.
  To this end, the Government will strengthen economic growth by boosting potential growth rate and expand virtuous cycle of growth and distribution based on the " Basic Policy on Economic and Fiscal Management and Reform 2019 ", the " Action Plan of the Growth Strategy " and so on. Moreover, in order to create a society in which everyone plays an active role and feels secure, the Government will establish the social security system for all generations.
  The Government issued a declaration of a state of emergency in accordance with the amended Act on Special Measures for Pandemic Influenza and New Infectious Diseases Preparedness and Response on April 7th, decided to designate all prefectures subject to measures under a state of emergency on April 16th and the public will work together to strongly advance measures to counter the Coronavirus. Under such situation, the Government will swiftly implement the "Emergency Economic Measures to cope with the Novel Coronavirus ´Ż×Thoroughly secure people 's lives and move toward economic revitalization´Ż× " (Cabinet Decision on April 7th and Cabinet Decision to change on April 20th) in order to make effort towards the early end of contagion, thoroughly secure employments, businesses and daily lives, and achieve strong economic recovery and social structural changes after the end of contagion. The Government will implement the FY2019 supplementary budget and the FY2020 budget including the temporal and special measures swiftly and steadily, and submit FY2020 supplementary budget to the Diet swiftly and work for early passage of it.
  The Bank of Japan enhances monetary easing with a view to doing its utmost to ensure smooth corporate financing and maintaining stability in financial markets. The Government expects the Bank of Japan to achieve the price stability target of two percent in light of economic activity, prices and financial conditions.

Detailed explanations

1. Demand trends such as consumption and investment

Private consumption is decreasing rapidly, due to the influence of the infectious disease.

  The Synthetic Consumption Index, which synthesizes demand-side statistics (Family Income and Expenditure Survey, etc.) and supply-side statistics (Indices of Industrial Producer's Shipments, etc.), decreased by 1.5% in February from the previous month.

  Looking at the background of consumption trends, real wage income of employees is increasing moderately. Meanwhile, consumer confidence is getting worse.

  Moreover, based on the interview results, selective expenditure as a whole is showing the influence of the infectious disease and the voluntary restraint along with the disease. Travel is decreasing significantly, with the results of utilization of Shinkansen bullet trains, etc. decreasing in February, and further decreasing in March. Eating-out is decreasing overall, although demand for take-out shows a steady undertone. Home appliance sales are decreasing, with the decrease in the weekly sales compared to the previous year expanding gradually in March. New car sales are showing weakness at a low level, although the year-on-year decrease has been narrowed.

  As a whole, private consumption is decreasing rapidly, due to the influence of the infectious disease.

  As for short-term prospects,the decrease will continue due to the influence of the infectious disease.

Business investment is almost flat.

  Business investment is almost flat. The Quarterly Financial Statements Statistics of Corporations by Industry (October-December survey, including software investment) show that business investment decreased in the October-December quarter of 2019 by 4.2% from the previous quarter. By industry, business investment decreased for manufacturers by 5.0% from the previous quarter, and decreased for non-manufacturers by 3.8%.

  Capital Goods Shipments and Imports, supply-side statistics, have been in a weak tone recently.

  According to the Short-Term Economic Survey of Enterprises in Japan (BOJ Tankan) (March survey), planned business investment for all industries in fiscal year 2019 is expected to increase. Planned business investment for fiscal year 2020 is also expected to increase. In BOJ Tankan, firms' judgment on production capacity shows that their sense of shortage is becoming weaker on the whole, with feelings of excess seen among manufacturers. The figures for Orders Received for Machinery, a leading indicator, are almost flat.

  As for short-term prospects, business investment is expected to pick up, mainly reflecting actions in growth sectors and such. However, full attention should be given to effects of the infectious disease.

Housing construction is in a weak tone.

  Housing construction is in a weak tone. Construction of owned houses is moderately decreasing. Construction of houses for rent is showing signs of bottoming out recently. Construction of houses for sale has been in a weak tone recently. Total number of sales of condominiums in the Tokyo metropolitan area is decreasing, mainly reflecting action restraint on the consumer side due to the influence of the infectious disease.

  As for short-term prospects, housing construction is expected to remain in a weak tone.

Public investment holds firm.

  Public investment holds firm. The amount of public construction completed in February decreased by 2.8% from the previous month, the amount of contracted public works in March increased by 14.8% from the previous month, and the amount of public works orders received in February increased by 2.1% from the previous month.

  As for short-term prospects, public investment is expected to show steady movement due to the execution of related budgets.

Exports are on a decline recently, due to the influence of the infectious disease. Imports are on a decline recently due to the influence of the infectious disease. The balance of goods and services is in surplus.

  Exports are on a decline recently, due to the influence of the infectious disease. By region, exports to Asia and the U.S. are on a decline recently. Exports to EU are on a moderate decline. Exports to other regions are almost flat. As for effects of the infectious disease on inbound tourism, the number of foreign tourists in March decreased by 93%. Concerning short-term prospects, exports are expected to decrease due to slowdown of overseas economies. Full attention should be given to the further downside risks of overseas economies.

  Imports are on a decline recently due to the influence of the infectious disease. By region, imports from Asia are on a decline recently. Imports from the U.S. and EU are in a weak tone recently. As for short-term prospects, imports are expected to remain affected by supply restriction due to the infectious disease.

  The balance of goods and services is in surplus.

  The balance of trade in February turned to surplus, as import values decreased. The deficit in the balance of services increased.


2. Corporate activities and employment

Industrial production is decreasing due to the influence of the infectious disease.

  Industrial production is decreasing due to the influence of the infectious disease. The Indices of Industrial Production decreased by 0.3% from the previous month in February. The Indices of Industrial Inventories decreased by 1.7% from the previous month in February. The Survey of Production Forecast in Manufacturing expects a decrease of 5.3% in March, and an increase of 7.5% in April. However, based on thehearing surveys , some movements of production adjustment are seen due to the influence of the infectious disease.

  By industry, transport equipment is decreasing. Production machinery is decreasing. Electronic parts and devices are picking up.

  As for short-term prospects, production is expected to continue to decrease. Full attention should be given to the further downside risks of overseas economies and effects of supply-chain risk by the infectious disease.

Corporate profits are decreasing rapidly, due to the influence of the infectious disease. Firms' judgments on current business conditions are deteriorating rapidly, due to the influence of the infectious disease. The number of corporate bankruptcies appears to be increasing recently .

  Corporate profits are decreasing rapidly, due to the influence of the infectious disease. According to the Quarterly Financial Statements Statistics of Corporations by Industry (October-December survey), corporate profits during the October-December quarter of 2019 decreased by 4.6% from the previous year and decreased by 2.5% from the previous quarter. By industry, manufacturers saw a decrease of 15.0% in corporate profits from the previous year, and non-manufacturers saw an increase of 1.1%. By size of company, large and medium-sized companies and small companies saw a decrease of 4.4% and 5.3% respectively from the previous year. According to the BOJ Tankan (March survey), in fiscal year 2020, sales are expected to decrease by 0.7% in the first half of the year and are expected to increase by 0.8% in the second half from the previous year. Current profits are expected to decrease by 7.2% in the first half and increase by 2.9% in the second half from the previous year.

  Firms' judgments on current business conditions are deteriorating rapidly, due to the influence of the infectious disease. The BOJ Tankan (March survey) revealed that firms' judgment on current business conditions deteriorated for all enterprises in all industries. Firms' judgment on future business conditions, which indicates the business condition as of June, becomes more cautious than that on current business conditions. According to the corporate activity-related DI of the Economy Watchers Survey (March survey), current and prospective business conditions fell significantly.

  The number of corporate bankruptcies appears to be increasing recently.

Employment situation shows some weak movements lately, due to the influence of the infectious disease.

  Employment situation is seen some weak movements lately, due to the influence of the infectious disease. The total unemployment rate was 2.4% in February, the same level as the previous month. The labor force, the number of employed persons, and the number of unemployed persons all increased.

  The number of employees is almost flat recently. The number of new job offers is on a downward trend. Active job openings to applicants ratio is decreasing. Overtime hours worked in the manufacturing industry are decreasing.

  As for the movement of wages, contractual cash earnings and the total amount of cash earnings are increasing moderately. These results show that real wage income of employees is increasing moderately.

  According to the BOJ Tankan (March survey), firms ' judgment on current employment conditions shows that the sense of a labor shortage is becoming weaker.Moreover, based on the interview results and so on, the daily number of active job openings to applicants compared to the previous year is on a decreasing trend in March, and employment situation is seen some weak movements lately, due to the influence of the infectious disease, with the number of consultations concerning employment adjustment, including suspension of business, increasing

  As for short-term prospects of the employment situation, weak movements will continue to be seen. Full attention should be given to the influence of the infectious disease.


3. Prices and the financial market

Producer prices are declining moderately recently. Consumer prices are flat recently.

  Producer prices are declining moderately recently on the basis of excluding the direct effects of the consumption tax increase.

  Consumer prices, in terms of general, excluding fresh food and energy, are flat recently on the basis of excluding the direct effects of the consumption tax increase and free early childhood education and nurseries. According to the Monthly Consumer Confidence Survey (multi-person households), the ratio of households which forecast a rise in prices was 70.3% in March, a decrease of 6.2 percentage points from the previous month.

  As for short-term prospects, consumer prices (general, excluding fresh food and energy) are expected to remain flat on the basis of excluding the direct effects of the consumption tax increase and free early childhood education and nurseries.

As for stock prices, after declining from the 19,300-yen level to the 17,800-yen level, the Nikkei Stock Average rose to the 19,800-yen level, and thereafter declined to the 19,200-yen level. The yen against the U.S. dollar (inter-bank spot rate), after moving in the direction of appreciation from the 108-yen level to the 107-yen level, moved in the direction of depreciation to the 108-yen level, and thereafter moved in the direction of appreciation to the 107-yen level.